The 2006 second quarter at retail was again a pretty stable one in terms of acquisitions, consolidations, or other major shifted that would have caused any real material changes to the numbers or trends for the period versus last year. Aside from Big Dog Holdings adding Steves Shoes and Footworks to the business at The Walking Company since last year, Collegiate Pacific adding Salkeld Sports and a majority interest in Sports Supply Group to its portfolio, and Oakley adding two small chains to its retail portfolio, the one big change for the industry was the move after the end of the first quarter by The Sports Authority to go private, a move that eliminates them from the quarterly retail review this year.
The two guys that were new to the chart in Q2 last year because of public offerings, Golf Galaxy and Zumiez, also posted the largest organic growth for the second quarter this year, with Zumiez revenues up about 41.5% for the period versus the prior year quarter and Golf Galaxy posting a gain of more than 37% for the quarter.
For the period ended July 29, 2006, or the quarter ended closest to that date for retailers not on a regular retail fiscal calendar, the retail sector saw profits take a big hit for the quarter, due mostly to issues in the mall. Total consolidated profits for the retailers covered in this report decreased nearly 19% in the quarter, while sales increased 7.6% for the period, about the same rate of growth as the first quarter. Excluding the Mall Specialty business, retail profits were up more than 25% for the period. When excluding the Catalog/Team/Web business, retailers posted more than 28% profit growth in the quarter.
Sporting Goods retailers delivered an 8.3% increase in profits on a 13.3% increase in sales, resulting in a 20 basis point decline in Return on Sales to 2.4% of sales. Family Footwear retailers posted a whopping 52% increase in the bottom line, thanks to impressive gains at both DSW and Payless. Family Retailer sales were up just 3.0% for the quarter. The combination of factors pushed Return on Sales for the sector up 140 basis points for the quarter to 4.3% of sales.
The Specialty sector saw the profit picture take a turn for the worse as more mall specialists joined Finish Line in the negative column when it came to profits. In addition to declining margins here, the mall is also seeing total sales turn negative or stagnate. Overall profits for the sector fell 53% in the period, with only Golf Galaxy, Journeys, and Zumiez showing profit growth in the period. Excluding the gains at Golf galaxy and Zumiez, profits would have fallen more than 58% in the Specialty sector in the second quarter. As a channel, Golf Specialty profits fell 108% and the Action Sports Apparel retailers saw a 38% decline in the bottom line. The Footwear Specialty guys experienced a 56% decrease in profits as a group.
Return on Sales, which represents income as a percent of sales, was pegged at 2.1% for the Specialty sector in Q2, down 260 basis points from the 4.7% ROS posted in Q2 last year and down 220 bps from the first quarter.
When assessing the impact of the newly acquired businesses at The Walking Company and deleting owned-retail, SEW estimates that the sector would have seen sales rise just 3.3% for the period on a like-for-like basis, reflecting a 14.5% increase in revenues at TWC on an organic basis.
The Catalog/Team/Web sector as a whole saw its profit picture decline significantly from a small loss in the year-ago period, with every company putting a hurt on the bottom line. Revenues in the Catalog/Team/Web sector, which do not include service income at GSIC, were up nearly 31% for the quarter, due in large part to the non-organic growth at Collegiate Pacific.
Return on Sales for the total retail segment declined 80 basis points to 2.6% of sales for the period, compared to 3.4% in the year-ago period.
